Correlation Between Fauji Fertilizer and Pakistan Oilfields
Can any of the company-specific risk be diversified away by investing in both Fauji Fertilizer and Pakistan Oilfields at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fauji Fertilizer and Pakistan Oilfields into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Fertilizer and Pakistan Oilfields, you can compare the effects of market volatilities on Fauji Fertilizer and Pakistan Oilfields and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fauji Fertilizer with a short position of Pakistan Oilfields. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Fertilizer and Pakistan Oilfields.
Diversification Opportunities for Fauji Fertilizer and Pakistan Oilfields
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fauji and Pakistan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Fertilizer and Pakistan Oilfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Oilfields and Fauji Fertilizer is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fauji Fertilizer are associated (or correlated) with Pakistan Oilfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Oilfields has no effect on the direction of Fauji Fertilizer i.e., Fauji Fertilizer and Pakistan Oilfields go up and down completely randomly.
Pair Corralation between Fauji Fertilizer and Pakistan Oilfields
Assuming the 90 days trading horizon Fauji Fertilizer is expected to generate 1.7 times less return on investment than Pakistan Oilfields. In addition to that, Fauji Fertilizer is 1.44 times more volatile than Pakistan Oilfields. It trades about 0.03 of its total potential returns per unit of risk. Pakistan Oilfields is currently generating about 0.08 per unit of volatility. If you would invest 63,560 in Pakistan Oilfields on November 4, 2024 and sell it today you would earn a total of 945.00 from holding Pakistan Oilfields or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Fertilizer vs. Pakistan Oilfields
Performance |
| Timeline |
| Fauji Fertilizer |
| Pakistan Oilfields |
Fauji Fertilizer and Pakistan Oilfields Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Fertilizer and Pakistan Oilfields
The main advantage of trading using opposite Fauji Fertilizer and Pakistan Oilfields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Fertilizer position performs unexpectedly, Pakistan Oilfields can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pakistan Oilfields will offset losses from the drop in Pakistan Oilfields' long position.| Fauji Fertilizer vs. Oil and Gas | Fauji Fertilizer vs. Nimir Industrial Chemical | Fauji Fertilizer vs. Ittehad Chemicals | Fauji Fertilizer vs. Wah Nobel Chemicals |
| Pakistan Oilfields vs. IGI Life Insurance | Pakistan Oilfields vs. Pak Datacom | Pakistan Oilfields vs. Nimir Industrial Chemical | Pakistan Oilfields vs. Shaheen Insurance |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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